By Shashwat Dev
Roll no. 873
National Law University Jodhpur-2013
The economy of Sweden is a developed export-oriented
diverse economy aided by timber, hydropower and iron ore.
The main industries include motor vehicles,
telecommunications, pharmaceuticals, industrial
machines, precision equipment, chemical goods, home
goods and appliances, forestry, iron and steel.
Traditionally, a modernized agricultural economy that used
to be employing over half of the domestic workforce, today,
Sweden further develops engineering, mine, steel and pulp
industries that are competitive internationally such as the
companies of LM Ericsson, ASEA/ABB, SKF, Alfa Laval, Aga
and Dyno Nobel.
Leasing is of great significance to the supply of capital
and investment sales in Sweden, as in the rest of EU.
Leasing and renting of equipment to commercial
premises has been the standard.
There is no real aggregated figures on how different
types of entitities make use of leasing and renting in
Sweden accounts for 20 per cent of all new investments
in machinery and equipment via the lease route. With
regard to new vehicles, it is estimated that 60 per cent
are financed by leasing. The book value of the lease
stock totalled just over SEK 190 billion, of which under
SEK 60 billion pertained to foreign lessees.”
Association Profile: Association of Finance
The nature of the leasing industry of Sweden can be
analysed by segmenting it into various kinds of leases
and the proportion of industry they comprises3,
Equipment and Automotive Leasing: The total
new equipment and automotive leasing volumes
stand at € 9707 million for the year 2012.
Real Estate Leasing: The total new equipment and
automotive leasing volumes stand at € 3 million for the
year 2010 and for H1 2011 € 3 million5. Thus
representing that real estate leasing has not gained much
of usage in Sweden.
Leasing is well established in Sweden, both as a form of
financing equipment and as a form for vendors to promote
their products. Despite the financial turmoil of 2008
leasing in Sweden has been a reliable source of corporate
finance and has proved to be an good and effective tool
for new investment in equipment.
Of all investment made in machinery and other types of
equipment almost 22% are being made through leasing.
International leasing is mostly carried out by a few large
leasing companies owned by export industry and banks.6
All types of companies, SMEs and large firms benefit
from leasing as lessees. Also, public bodies lease
equipment to a significant extent. Consumer leasing exist
but is of little significance in Sweden.
Sweden though being a regulated market is however
minimally regulated when it comes to leasing industry.
“The tax authorities have not made a strong attack on
finance leasing in Sweden as in some other markets.”As a
result, finance leasing remains significant in the car fleet
market, which accounts for 25 to 30 per cent of all new
car sales in Sweden
IAS 1712 stipulates that contract should be either
classified as either finance lease or operating lease. A
financial lease is an agreement where substantially all the
risk and reward associated
with ownership transfers form the lessor to lessee. The
ownership and title may, but not necessarily be transferred
to lessee form lessor. In Sweden, lease contracts usually
do not transfer ownership.13
The real estate leasing industry is Sweden is not much flourished in
comparison with the equipment leasing industry as being clearly evident
through the factual features of the industry. The reason for the same lies in
the Swedish code which may be analysed as:
Real Estate Leasing: In real estate leasing the Swedish authorities have the
policy of giving public property as site-lease holdings with fixed rentals for
a long period of time without subjecting the same to review before the date
of review, thereby flourishing the leasing of such land for development
purpose. But, however in case of residential leases the laws are more tenant
favourable than market oriented. The owners are not allowed to charge rents
that are substantially higher than the negotiated price between tenants’
association and landlord thereby neglecting the market.
Equipment Leasing: By enacting legally restricted IFRS,
the Swedish authorities have been able to allow the
businessman and individuals to treat both the financial
leases and operating leases as operating leases. The trickle
down benefit of such policy for both the lessor and lessee
has led to an exponential growth for this segment;
For Lessor: For lessor treating financial lease as operating
lease enables him to keep the asset in his balance sheet
and charge depreciation on such asset thereby helping him
to limit his tax liability without even possessing the
ownership of the equipment or after even parting away
from the equipment for a considerable long period.
For Lessee: For lessee treating financial lease as operating
lease enables him to attain the ownership of the asset along
with treating the payment made to the lessor as business expense and
thus tax deductible.